McDonald's Japan to set new business plan by Oct

Tokyo, May 26 : McDonald's Japan said on Friday it aims to create the framework of a new food business by October and has begun talks with one or two domestic companies On possible partnerships.

Eikoh Harada, chief executive of McDonald's Holdings Co.

(Japan), just under half-owned by McDonald's Corp., said it aims to open a test store of the new business, which will be operated under its global brand, by the end of this year.

McDonald's Japan, which has some 3,800 outlets in Japan or nearly 13 percent of all McDonald's worldwide, said in April it would start planning a new food business and seek one or more partners to make better use of stores with low sales.

''We hope to build partnerships that allow us to accelerate our franchise business,'' Harada told Reuters in an interview.

''With this many small outlets, some of them become negative assets if left untouched. We are seeking ways to turn them to positive assets.'' McDonald's Japan returned to the black for the first time in three years in calendar 2004 and forecast further growth in 2005, but ended up reporting a 98 percent plunge in net profit last year after revising its outlook four times after a new strategy and a change in its clocking-in system sent profits diving.

It has struggled with a fall in per-customer spending since introducing lower-priced menus in April 2005 to regain market share. To seek higher profitability, it raised prices from May 13 for half of its 64 products by 10 to 50 yen.

Harada said he is not considering more price rises this year.

He stressed that McDonald's Japan's same-store sales, a key measure of health in the retail industry, have been exceeding year-ago levels, while convenience stores and other competitors that sell take-out food have been showing continuous falls due to a saturated market and unfavourable weather.

''We have built up fundamental strength that helps us lessen the impact of external factors,'' he said.

''Per-customer spending will recover if we don't let the number of customers fall, and we will not let the number of customers fall.'' McDonald's Japan paid a 30 yen dividend in each of the last five years, and Harada said it planned to keep a stable dividend payment instead of shifting to one that reflect earnings.

Its shares closed down 0.52 percent at 1,899 yen on Friday, while the Nikkei average rose 1.77 percent.

Reuters